Hunting for cheap stocks with potential is a key element of effective conventional or online stock trading. With the right trading software, people trading stocks online from the comfort of their home can have a clear view of the market and identify segments that have potential.
The Vagaries and Hidden Potential of the Biotech Industry
The biotech industry, for example, has some very cheap stocks now, one of which we’ll examine in detail. Now we do agree that the biotech industry is an unpredictable one, and it is estimated that more than 90% of the biotech stocks publicly traded could lose in 2017. It is also estimated that the majority of the studies conducted by biotech companies in the clinical, preclinical and discovery stages end up in failure.
But on those occasions when you do get it right, you could be in for some massive gains. So it’s worth checking out. A glowing example is Pharmacyclics, the cancer drug developer, before it was brought by AbbVie in 2015. The stock rallied from below $0.60 per share back in February 2009 to a whopping $261.25 per share at the time of its purchase by AbbVie, translating to a return of 45,700%.
A Cheap Stock with a Lot of Potential
Gilead Sciences ($GILD) would really qualify as a cheap biotech stock. Its forward P/E is just seven, making it the only single digit forward P/E biotech stock. And what makes it really attractive is the market dominance of its Hepatitis C (HCV) therapies, on account of their efficacy and short treatment period. The company has around 90% market share in this segment. Not only is it currently unlikely that a competitor would develop an equally quick working remedy, $GILD is also researching further improvements on its treatment. Its HCV product line is trusted by physicians and patients, and that perception is hard to change.
The benefit to shareholders also includes the annual free cash flow ranging from $15 billion to $18 billion that Gilead is able to produce each year. In November 2011 Gilead acquired Pharmasset for $11 billion. That purchase was crucial in making it the dominant force in the HCV market. It can afford to continue shopping for acquisitions or partners to help in its research in Hepatitis B, HIV, non-alcoholic steatohepatitis and HCV. Gilead is also in a position to enhance its dividend or share repurchase program. The fact that it is also inexpensive means it certainly seems to be worthy of your attention.
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